French private equity firm PAI Partners has made a formal proposal to investors to cut its €5.4bn fifth buyout fund in half, and to change its governance in favor of investors, a source close to the matter said on Tuesday.
“PAI sent its offer to investors this evening,” the source told Reuters, adding that a response was expected on December 3.
Any shrinking of the fund, which bought stakes in IT services company Atos Origin and building materials firm Xella last year, would echo similar moves by peers TPG and Permira, who have faced pressure from investors keen to reduce their exposure to private equity.
“We need 66.67% of the votes to approve or reject the proposal. This is not a done deal but it’s feasible,” the source added.
In September, sources familiar with the situation said that the fund was ready to cut the fund by half following a recent management bust-up.
The move follows the shock early retirement of Dominique Megret as chief executive in August, twinned with the departure of his right-hand man, Bertrand Meunier, after a boardroom battle with other partners.
Megret’s exit triggered a so-called “key-man” clause, allowing investors to renegotiate their commitments to the PAI’s fifth European buyout fund.
PAI is notably offering investors not to take fees for setting up some transactions and to lower management fees. It is also offering to lower the threshold of investors votes required to open or close a fund to 60% from 80%, the source said.